Co-operative Asset Management, one of the most active investors in the stockmarket, has sent a stark warning to major companies that it will not tolerate inflated boardroom pay during the recession and signalled its willingness to vote against non-executive directors responsible for setting pay.

The Manchester-based group, which has voted against the remuneration report at Royal Bank of Scotland since 2002, has set out its concerns in a letter to remuneration committees, which makes it clear that rises in base salary will be tolerated only when there is a believable explanation. The firm, part of the Co-operative Group, has £2bn under management.

The warning to remuneration committees - usually staffed by non-executive directors - comes at a time when investors are on high alert for boardroom excess.

RBS endured a record level of dissent against its pay policies at last Friday's annual meeting because of the £703,000-a-year pension paid to Sir Fred Goodwin, its former chief executive. The construction company Bellway had its remuneration report voted down at the start of the year when bonuses were paid even though performance targets had not been met.

Other controversial issues coming up include whether to register a protest about payouts to former HBOS executives who lost out after the Lloyds TSB rescue.

At a time when investors are under fire from the government for not doing more to prevent the banking crisis, the Co-op points out that it voted against Northern Rock remuneration reports prior to the credit crunch and was one of the few institutions to vote against the RBS takeover of ABN Amro, which is now regarded as the main reason for the bank's downfall.

Investors have told the Guardian they are being lent on by remuneration consultants, which advise companies on pay, to be more flexible about remuneration in the current climate.

However, Pat Wade, corporate governance manager at Co-operative Asset Management, said: "We urge remuneration committees to show restraint, and we will be following the issue of discretionary payments closely throughout the AGM season, along with any changes being proposed to incentive schemes. We will not tolerate any handouts being made through the 'back door'."

The main way to register a protest about pay policies is to vote against a remuneration report at the annual meeting but the non-executives on the remuneration committee may be targeted as a last resort.

In its letter, the Co-op called on remuneration committees to:

• Ensure that the reasoning behind any base salary increases in excess of inflation for 2009 is fully explained.

• Avoid any increases in base salaries being interpreted by investors as compensation for performance schemes not paying out.

• Ensure that under-performance is not rewarded through discretionary payments.

• Ensure that no reward is made where performance has resulted from business practices that expose shareholders and customers to undue risk.

• Reassure investors that claw-back provisions are in place to manage instances in which prior performance-related rewards have been erroneously earned.